Mike's Bikes Africa

In the past, our Sister Shop plan was pretty simple.  Once we selected an entrepreneur, we would collect enough bikes to fill a container and ship it.  Then we time our trip to Africa to hopefully coincide with the container arrival (not an easy task).  While there, we would organize the container delivery, unload the container, work on the bikes, build the shop and train the shop owner.  This was all crammed into a week or so, which was obviously a huge logistical challenge and in retrospect, not the best way to do it. But with our families back home, not to mention our jobs at Mike’s Bikes, we just couldn’t afford more time away. This is why we’re so excited to be partnered with Bicycle Recycle, who will be providing distribution support. With them providing a huge amount of logistical assistance, we can focus our time and energy on developing our entrepreneurs in best business practices and mechanical expertise. Also, our old way of opening these shops, what we affectionately call Sister Shop 1.0, presented huge challenges to the local entrepreneurs. Trying to figure out how to handle a container full of 500 bikes is a daunting task for a brand new business owner, as is the psychological and accounting leap required to transition from the first load of “free” bikes to the more sustainable model of buying bikes to cover their shipping and duty cost.

So for the Lesotho shop, we sat down with Tumi and created an opening budget, which included a certain amount of bikes from Bicycle Recycle. This time, we’ll give Tumi the money to set up his store and to buy his opening inventory.  This has two main benefits, the first being he can order an appropriate amount of bikes based on his space, and it gets him in the habit from Day 1 of paying a cost for the bikes.  The idea that the business needs to conserve enough of its sales revenue to purchase more inventory is a concept that some of our guys have struggled with. We hope our new method will make that idea easier to conceptualize and follow.

It’s important to note that our friends at Bicycle Recycle are not making any money off of this model and, in fact, they have donated a considerable amount of their own time and money to set up a specific delivery network to all of our shops. The money they receive for the bikes helps cover the cost of shipping the container, unloading and storing the bikes, and delivering them to the shops. They believe in the project as much as we do and are committed to helping our guys succeed.  Again, more info about our relationship with them to come…

As for Tumi’s actual store, we decided that two 20’ containers in an L shaped configuration would work best.  On the fenced-in property, there is a large bushy tree that will provide great shade for the shop.  The tree will be right at the corner of the “L” and Tumi will also install a triangular canopy between the two containers for additional shade.  He can source the containers locally and that is included in our budget.  Another change from Sister Shop 1.0 to 2.0 is the idea of an Opening Budget.  In the past, we arrive with a bunch of cash to buy materials, hire workers (remember the Joiner from last year, we’re still not sure if he ever finished…), etc.  Our Sister Shop owners often had no idea how much was spent getting their store open and never had to deal with working within a budget.  Tumi will be given his budget and it’s up to him to find the best deals, weigh all his options, and make his own purchase decisions, providing valuable experience with deciding how to best spend each dollar (or Rand or Maluti).  We also included in the budget funds for modifying the container with a door, window, and all the interior furnishings required for a functioning bike store.  The plan is for Tumi to have his shop completed before we go back next year to complete his training and get him fully up and running.  We are confident this will happen on time based on the results of his first task.  Before we left him, he had a list of items to complete before we’d give him any money – register his business with the government, receive clearance from the local Chief, open his bank account, etc.  By the time we arrived in Joburg, we received this email from him:

Sent: Wednesday, November 2, 2011 2:07 PM

Subject: given fast service because i’m the star of the country

Hi Ken and Matt?

you can’t believe that i have opened an account and registered the business so they ask me to collect the license next week, at least i reduced my work before the next race.

And to think we had our fingers crossed that he would get this much done within the first month…

The rest of Tumi’s budget includes a basic laptop and 3G stick, a small office area, a starting marketing budget, work bench, proper tools, electricity to the container, installing lights and outlets, bike storage racks, shelving, an opening order of bikes, parts, and accessories, and a big sign to advertise on his busy road.  We plan to visit Tumi at some point next year to finish up his training, work with him in the shop, and look for areas where he can improve and grow.  In the meantime, we’ll be in constant contact with him as the shop is completed, the containers are placed, etc.  One requirement we have of all Sister Shops is regular communication and reporting on the health of the business.  These guys have no business or accounting experience, so this is an area where we leverage our experience to help guide them to success.  With our help, Tumi will develop his monthly operating budget, assign himself a salary, and start to make decisions on how many staff to hire, where to advertise, etc.

We’re really excited about this new model, and we’re confident that it will give Tumi a much better chance at success and provide a blueprint for future Sister Shops.

After spending a couple days with Tumi in Maseru, we got a good sense of the opportunity in front of him.  Having the chance to meet with a prospective Sister Shop owner and see their situation first hand is a luxury we’ve never experienced.  We got a chance to see the market potential, get a sense for how interested people are in bikes and what they’re able to spend, check out the existing bike and parts supply and see the location Tumi has proposed.

We spent two and a half days touring the city by bike and based on the reaction of people as we rode past, Tumi should do quite well.  People were very curious and excited to see our peloton cruise by.  Often rolling through with a pack of 10-15 people, we were quite a sight.  Every school we passed produced cheers of “bicycle, bicycle” as the kids ran to side of the road to watch.  Often the teacher would recognize Tumi from the work he’s done with the local kids and give us a big smile and wave.  When we were in more crowded parts of the city, Tumi seemed to know everyone and would tell them “these are the guys I was telling you about, I’ll have bikes to sell soon!”  Tumi’s success with racing over the years has made him a bit of a local celebrity.  He has a couple newspaper articles about him on the wall of his small workshop.  We found out towards the end of our trip that he represented Lesotho in the Commonwealth Games for cycling! So with the amount of interest in bikes for transportation and recreation, combined with a city perfectly suited for getting around by bike, we feel the sky’s the limit for Tumi.

In order to make our Sister Shops sustainable, they have to be able to buy bikes and sell them with enough markup to stay in business and grow.  That means their customers have to be able to afford to spend a certain amount on a bike.  After the initial inventory donation, we require the shops to cover the cost of shipping the donated bikes from California as a step toward true sustainability.  The total shipping cost and import duties for the container, divided by the number of bikes inside, usually comes to around $40 each (why it’s so important for us to pack as many as possible into the container).  So with an assigned cost of $40, Tumi will need to sell his bikes for $50 to $100, depending on the condition, quality, and features.  After a bit of market research, we determined this would be possible.  As we’ve seen in other markets where we have Sister Shops, there is availability of what are derisively referred to as “China bikes”.  These are usually relatively expensive and always of extremely poor quality.  And they are sold in what’s referred to here as “China shops” that also sell a myriad of other non-bike things.  There is zero support from a service or spare parts standpoint, which is a necessity for bikes this junky, so most people just choose to walk.  Maseru is no different, there is one of these stores in town and based on the condition of the 6 or so bikes lined up outside, we guessed they had been sitting there for quite a while.  The plastic front wheel of one kids bike appeared to have been stepped on by a passer-by and it was broken completely into two pieces, but still out available for sale!  These bikes were priced at $80 – $120, prices that a good chunk of the population could afford, but would consider a waste, knowing that these bikes won’t work and won’t last.  The local people are hungry for real bikes, are able to afford Tumi’s bikes, and are just waiting for them to actually appear here.

In order to complete our picture of Tumi’s chance of success, we had to see where he planned on putting his shop.  Maseru is a much less developed city than Gaborone or Bulawayo.  There is retail space to rent but there is also a solid “roadside” economy where people sell wares by the side of the road either in a little stand or on foot.  As we know all know too well back home, spending too much money on rent means certain failure.  So Tumi has decided to do a containerized store on the property of his godfather, Mr. Sello.  Mr. Sello owns a security company just outside of downtown, but directly on the main road into town.  His office is a small building set back from the road a bit and he has offered to let Tumi put his container in his “front yard”, rent free!  This is huge.  And while a containerized shop is a step down from a proper retail space, not having to cover a large monthly rent expense increases Tumi’s chance of success dramatically.  If things go well, he can always move into a more typical retail space.  Add in the fact that Tumi’s bikes will be safely stored on the property of a security company, and you can see why we feel this is a perfect place to start.

So with a captive market starved of proper supply, a customer base that afford to pay a reasonable amount for a good bike, and a good enough location with no rent, we feel the situation is ripe for Tumi’s success.  Couple this with Tumi’s boundless energy, passion for bikes and his “celebrity”, it was time to set a plan to get him open!